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Accounting for the evolution of China's production and trade patterns

Author

Listed:
  • Hanwei Huang
  • Jiandong Ju
  • Vivian Z. Yue

Abstract

This paper studies the evolution of China's production and trade patterns during its integration into the global economy. We document and explain new facts concerning changes in production and exports at the industry and firm levels using microdata and a quantitative Ricardian and Heckscher-Ohlin model with heterogeneous firms. Counterfactual simulations reveal that capital deepening made China's production and exports more capital-intensive, although labor-biased productivity growth acted as a counterforce. Consistent with the data, our model demonstrates that China's trade openness peaked around the mid-2000s and fell until the 2020s, while the world's exposure to Chinese exports rose continuously.

Suggested Citation

  • Hanwei Huang & Jiandong Ju & Vivian Z. Yue, 2024. "Accounting for the evolution of China's production and trade patterns," CEP Discussion Papers dp1997, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1997
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    Keywords

    production and trade patterns; comparative advantage; heterogeneous firm; trade liberalization; capital deepening; productivity growth; trade openness; China shock;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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